Funding Winter: Only 11 new unicorns minted in August globally, as VCs conserve cash

The startup funding winter is beginning to play out more sharply now, with new unicorn additions slowing down. In August 2022, only 11 new unicorns were added to the global count, a sharp dip from the 45 added in August 2021, according to Crunchbase data. 

Even on a month-on-month basis, lesser unicorns were added in August compared to July 2022, when 14 companies reached the $1 billion valuation. Earlier, in February this year, 56 new unicorns were minted. This signals a definite slowdown in the venture capital market, as per Crunchbase.

Of the 11 new unicorns in August, 6 are from the US, 2 from China, and 1 each from India, Indonesia, and South Korea. The companies belong to multiple sectors, from ride hailing to real estate and EVs to marketplaces, and more.

Zomato-backed logistics startup Shiprocket was the only Indian startup to turn unicorn last month, after raising a Series E round of $32 million. The startup is currently valued at $1.3 billion, as per Tofler data.

The unicorns minted last month have raised a total funding of $3.2 billion over time, and added $18 billion in value to The Crunchbase Unicorn Board (a worldwide tracker of ~1,400 private companies valued at $1 billion or more). “This signals a big change in the venture markets from August a year ago when 45 companies joined the board, adding $82 billion in value at that time,” Crunchbase stated in its latest update.

The India Situation

In India, specifically, August 2022 recorded $885 million in funding across 102 rounds, down by 20 per cent and 8 per cent respectively, compared to July 2022, reveals Tracxn data. Only two Indian companies managed to raise large rounds last month. These include edtech unicorn upGrad, which pocketed $210 million, and lending startup EarlySalary, which raised $110 million.

“India is currently experiencing a funding winter and is expected to continue for the next 12-18 months. The quarterly funding peaked in Q3 2021 at $14.8 billion and has been on a steady decline since then,” Tracxn stated.

Anup Jain, Managing Partner at Orios Venture Partners (an early-stage VC fund), tells Business Today, “Amidst the funding winter, startup founders are using a variety of strategies to stay afloat. They are delaying decisions about new hires and geographic expansion. In order to obtain funding, they are acting wisely by accepting conservative valuations… This bearish phase will continue for the next 12-18 months but will definitely build sustainable and profitable businesses.” 

The dip in VC investments in India is caused by sustained global geopolitical uncertainties and rising inflation. “VC-backed companies in India shifted their focus to cash preservation in anticipation of funding becoming less easy to obtain over the next few quarters,” says an analyst from KPMG. 

“While VC investment in India may be muted over the next quarter or two due to the global reduction in money supply and other factors, the country is expected to remain quite attractive to VC investors over the medium to longer term due to its relatively positive macroeconomic environment and market demographics,” he added.

Global Outlook

Cumulatively, in 2022, unicorn startups globally have raised ~$102 billion, compared to the peak unicorn funding in 2021, when companies fetched a whopping $305 billion in private financing, Crunchbase data shows.

The top-valued unicorn from the past month is Shanghai-based Zhiji Auto, an EV company which is a joint venture between SAIC Motor and Alibaba Group. Zhiji was valued at $4.4 billion in its Series A round. 

Another notable startup that reached the $1-billion private market valuation in August was WeWork founder Adam Neumann’s new real estate venture, Flow. It raised a $350 million seed round from Andreessen Horowitz, valuing the company at over $1 billion even before its launch.

Also Read: How the Funding Winter Has Affected Indian Start-ups

Also Read: upGrad raises $210 mn in latest round amid funding winter, layoff season